Cantor Fitzgerald analysts initiated protection of Coinbase with an "Obese" ranking and worth goal of $245, arguing on Tuesday that Wall Avenue has neglected how the crypto alternate’s stablecoin relationship with Circle dovetails with its Ethereum-based community.
“We view each of those segments as being instrumental in altering the narrative surrounding COIN, from being a cyclical crypto buying and selling platform to being a mission-critical infrastructure layer of the crypto economic system,” Brett Knoblauch and Thomas Shinske wrote in an 84-page report.
COIN is at present buying and selling palms at roughly $150, down almost 5% on the day and 12.5% over the past week amid a market-wide dive triggered by President Trump's rising commerce conflict.
Coinbase earns income from reserves backing Circle’s $60 billion USDC stablecoin, primarily based on a non-public industrial settlement with the agency, whereas customers routinely pay sub-cent transaction charges to Coinbase on a layer-2 community it developed known as Base.
In 2024, the corporate’s foremost income got here from charging charges on transactions, principally inside its centralized buying and selling platform, totaling $3.9 billion, in accordance with a Securities and Alternate Fee submitting. Full-year stablecoin income in the meantime got here in at $910 million, up from $694 million in 2023.
Stablecoin laws being weighed on Capitol Hill may set up a pathway to legality for corporations like Circle throughout the U.S. Regardless of competitors from doubtlessly 1000’s of corporations, Cantor Fitzgerald analysts consider that Circle will keep its share of the general stablecoin market.
If the marketplace for stablecoins exceeds $2 trillion by 2035, then Coinbase’s stablecoin income may improve 5-10x, relying on bond market situations, the analysts wrote.
In keeping with Cantor Fitzgerald analysts, Coinbase mentioned in 2023 that it might begin receiving “100% pass-through curiosity on USDC held on its platform,” whereas splitting curiosity revenue from USDC held elsewhere evenly with Circle.
“As USDC turns into extra broadly adopted, new USDC can be minted, and USDC’s market cap will develop,” the analysts wrote. “If the steadiness of USDC owned by customers then will increase on Coinbase’s platform, COIN ought to have the ability to generate extra stablecoin income.”
Coinbase shares surged after U.S. President Donald Trump’s White Home win in November however have since given up their post-election positive factors. On Tuesday, Coinbase’s inventory was buying and selling palms round $154, down 38% year-to-date, in accordance with Nasdaq.
Base launched within the third quarter of 2023, and it has steadily grow to be a dominant hub for builders and customers. Over the previous 30 days, Base has seen 17 million lively addresses, in accordance with the layer-2 analytics platform GrowThePie. Arbitrum, the second-most in style layer-2 community, has seen 5.3 million lively addresses throughout that span.
As a result of Coinbase customers can simply transfer their funds to Base from the alternate, Cantor Fitgerald analysts consider that continued developer exercise creates a flywheel. As Base sees extra customers, builders create extra functions, and the result’s extra transaction charges.
Coinbase operates a sequencer for its layer-2 community, which is answerable for ordering transactions, bundling them, and posting them in bulk to Ethereum’s mainnet.
Within the fourth quarter of final yr, Coinbase mentioned $68 million in “different transaction income” was “largely pushed by increased sequencer income on Base” in a shareholder letter.
Alongside consumer development, Cantor Fitzgerald analysts count on the worth of property held on Base to surge as regulators just like the SEC develop extra snug with tokenization. The method refers to representing real-world property like shares and bonds with digital tokens.
The worth of tokenized property may attain $2 trillion by the top of the last decade, in accordance with a report from the worldwide administration consulting agency McKinsey.
Despite the fact that the SEC shut down Coinbase’s efforts to tokenize securities in 2020, Coinbase CFO Alexia Haas mentioned in March that the agency was speaking to the regulator about tokenization once more, Cantor Fitzgerald analysts famous.
Edited by Andrew Hayward
